What is a mobile wallet?
A mobile wallet is an app on your phone that allows you to store and send Bitcoin. This method is the quickest and most convenient way to learn how to store your own private keys. With these keys, you will be able to take full control of your funds without third-party intervention. A mobile wallet falls under the category of a “hot wallet”, which differs from a cold storage solution. Hot wallets are always (or periodically) connected to the internet while cold storage wallets do not connect to the internet. Below are the skills, benefits, and risks of using a hot wallet:
Skills required for using a mobile wallet:
- Download apps, typing, copying and pasting, email, and camera.
- Executing Bitcoin transactions (sending and receiving).
- Using an exchange (optional but using an exchange is the easiest way to fund your wallet).
Benefits of a mobile wallet:
- Eliminates the need for a bank. If you are able to find a vendor who accepts on-chain or off-chain transactions with Bitcoin
- Fastest and easiest way to set up a Bitcoin wallet.
- More secure than an exchange account. Funds may be recovered on a new device if the seed phrase is still in possession.
- Autonomy. You control your funds.
- Easiest steps to follow for completing transactions. Copying a QR code address with a phone’s camera makes it even more convenient to complete transactions.
Risks and trade-offs of a mobile wallet:
- If the phone is lost and there is no access to the seed phrase, the funds are also lost.
- Must make sure to download the official wallet app.
- Mobile viruses and malware are a potential problem when connected to the internet.
On-chain transaction versus off-chain transactions
One of the biggest selling points for using a mobile wallet is the convenience to use on-chain and off-chain transactions within the same app. On-chain transactions occur on the blockchain and require more time to execute but this gives the user verification that the transaction completed. On-chain occurs when a miner includes your transaction with the block they mine in order to have it verified on the network. Depending on the fee you are willing to pay, confirmation may take anywhere from 40 minutes to a few days. The higher the fee paid, the quicker the transaction. On-chain is rarely used for small purchases but people do have the option to do so.
In contrast, off-chain may be executed instantly or within a few minutes. These methods are second layer solutions built on top of Bitcoin to provide faster transactions. They are executed without the need to wait for miners to confirm transactions on the blockchain.
Step 1. Which mobile wallet should I use?
The final decision is left up to the user but starting with something like Blue Wallet or Hodl Wallet will provide the fundamentals and access to the main features that all mobile wallets have. Also consider which mobile wallets are available in your territory and if they are compatible with your device.
Step 2. Downloading the mobile wallet
Once you decide on a mobile wallet that fits your needs and requirements, you may then go to the Google Play Store or Apple App Store on your mobile device. Type in the search bar for the mobile wallet and then select “install” or “get” to download the wallet. Depending on your cellular or WiFi speeds, this may take a few minutes to complete.
Step 3. Setup and backing up your mobile wallet
You may then click the app on your phone’s home screen to begin setup. The steps for setup will vary depending on which wallet you select, but the majority of them will have you perform one or multiple security measures for your wallet. These may include; creating a passphrase, entering a pin, or setup for multi-factor authentication.
After securing your account with the mobile app, we must now backup the seed phrase for the Bitcoin wallet. A seed phrase will allow you to restore your wallet if you ever lose access to your phone. All mobile wallets will have the option to restore from a backup on a new install of the app. Some wallets will require 12 words while others will use 24 but it is important to have your seed phrase written down and stored safely in multiple locations.
Step 4. Sending and receiving Bitcoin
You will have a few options for depositing funds into your newly generated mobile Bitcoin wallet:
- Send funds from an exchange (some wallets are integrated with an exchange or may forward you to an exchange).
- Have a friend or peer send you funds by sharing your public address with them.
- Send funds from another wallet you already have.
If you have never purchased Bitcoin before and do not have friends or peers you can buy Bitcoin directly from, the next best option is to buy directly from an exchange. After signing up with the exchange and purchasing your first Bitcoin, you may then copy and paste your wallet’s address into the exchange interface for withdrawals. Finally, confirm the withdrawal on the exchange interface and then wait until the funds appear in your wallet. Usually 6 confirmations are needed for most wallets.
Step 5. Spending your Bitcoin
You now have the option to either store or spend your Bitcoin. There are many schools of thought on this particular decision. The beauty of Bitcoin is that you have autonomy and may do whatever you wish with the funds you hold.
Always verify the mobile wallet
Before you download the mobile wallet, make sure that you are downloading the correct app. Downloading the wrong app is less of an issue today but this is still a possibility to be aware of. This precaution also falls under staying diligent with emails. A verified mobile wallet company will never email or contact you in any way to request your seed phrase. Never type your seed phrase onto a computer.
Copying the seed phrase
There are some wallets that may not “force” a backup during the initial setup but it is always best practice to copy down the mnemonic seed phrase on paper. You may also want to copy it down multiple times on a material that is durable. With these copies you may then want to hide each one in a different and secure location. To go a step further, you may even want to break up the seed phrase in multiple parts to hide in multiple locations.
Secure your connection
Not every wallet has this option, but there are a select few that allow you to enable the use of Tor. Tor will allow you to keep your transactions private from prying eyes if you are using WiFi or cellular service.
Have a backup device
If you lose your phone or device with your mobile wallet on it, having access to your multi-factor authentication through a second phone is a really good way to save time and avoid stress. This all depends on the setup you wish to configure with your mobile wallet. If you do not have a second phone, make sure to store your passwords, pins, passphrase backed up. It also may not be necessary to keep a second phone as a backup because there are mobile wallets that have a desktop version of the app.
This should go without saying for most people but just in case you do not have a pin to open your phone, make sure this security measure is set up. A fingerprint ID or face ID enabled on your phone will also increase security for your mobile wallet. This extra layer of protection will not only make it harder for others to steal your Bitcoin funds, but it will also make it harder for them to access other apps that may contain your sensitive data.
Amount of funds to store on a mobile wallet
This will be based on the personal preferences of each individual but it is best practice to never store more funds on a mobile wallet than you are willing to lose. For a lot of people, this may be anywhere from $5-$1,000 dollars.
List of Mobile Wallets to consider:
Bitcoin Mobile Wallets
- Hodl Wallet
- Blue Wallet (Also has Lightning)
- Blockstream Green (Also has Liquid)
- Samourai Wallet (Android only)
Bitcoin Lightning Mobile Wallets
Crypto (multiple coins) Mobile Wallets
Whichever wallet and method you decide to use, make sure it makes sense with the objective you wish to accomplish. Mobile (hot) wallets are best used for temporary storage and it is important to keep that in mind when transferring funds. If you are planning on moving your Bitcoin within a short period, a Bitcoin mobile wallet will be the best option. Practice with what works best for your needs so that you can save yourself a lot of time in the future.